On December 14, 2021, under the guidance of the National Development and Reform Commission, China Securities Regulatory Commission and Shenzhen Stock Exchange, and with the strong support from Guangdong Development and Reform Commission, CPC Guangzhou Municipal Committee, Guangzhou Municipal People’s Government, Guangzhou State-owned Assets Supervision and Administration Commission and other departments, the ceremony for the listing of Real Estate Investment Trust for Huaxia Yuexiu Expressway ('Huaxia Yuexiu Expressway REIT'; fund cod: 180202) was successfully held. With the bell ringing for the listing of Huaxia Yuexiu Expressway REIT, another domestic listing platform was formed for the state-owned assets of Guangzhou Municipality, which marks another solid step made by Yuexiu Group on its strategic development road for building a multi-level listing platform and ranking itself among the Fortune Global 500 with high-quality growth.
The total fund raised by Huaxia Yuexiu Expressway REIT is RMB 2.13 billion. Its underlying asset, namely the Hanxiao Expressway (composed of the main line of Hanxiao Expressway and the Northern Airport Connection), is located in Wuhan which is appraised as the No. 1 city in Central China and the 'national Overpass', and is the intersection of the vertical and horizontal axes in the main skeleton of national comprehensive three-dimensional transport network. With the characteristics such as long-term stable cash flow and highly-dispersed income sources, expressways are the ideal underlying asset of public-offering infrastructure REITs.
Innovation in financial market serves the real economy
At present, the room for development of infrastructure investment through the traditional debt financing is gradually shrinking in China. It has become a reasonable choice to revitalize a huge amount of high-quality stock infrastructure assets by using the innovative financing tools, release the precipitated fund, and thus continuously invest in new projects. In the critical period during the transformation between the old and new development modes, the development of public-offering infrastructure REITs is deeply in line with the major task of supply-side structural reform, greatly improves the efficiency of financial market serving the real economy, raises the capital efficiency, and opens up a new development path for the infrastructure investment and financing in China. In general, the public-offering infrastructure REITs are a major innovation in the supply-side structural reform in China’s financial market, and are also an important measure to increase the supply of high-quality financial products, revitalize the high-quality stock infrastructures and strengthen the financial market serving the real economy.
The issuance of this public-offering REIT which takes the Hanxiao Expressway as the underlying asset is an important measure of Yuexiu Group to deeply practice its original intention and mission as a state-owned enterprise and promote its high-quality development with reform and innovation, and is also a key action of Yuexiu Transport to implement the 14th Five-Year Plan and move forward to the strategic vision of 'becoming the domestically-leading transport infrastructure asset management company'. By building an equity capital operation platform based on public-offering REITs, Yuexiu Transport is expected to open up the asset cycle of 'investment, financing, management and retirement' and realize the optimization and improvement of development mode, which is of great strategic significance for further expanding and strengthening its main business relating to transport infrastructure and realizing its medium-and long-term sustainable development.
Investors are highly enthusiastic about subscription, and Yuexiu Brand is highly recognized by capital market
The issuance of this fund was warmly welcomed by investors, and the subscription of the part of this fund reserved for public investors was completed in advance on the first day of the offering. The announcement reveals that, the number of effectively-subscribed fund units corresponding to 85 effective quotation & placement objects managed by 34 offline investors is about 2.42 billion, with a subscription multiple of 38.41; the number of public investors which have made the effective subscription is 108,597, and the number of effectively-subscribed fund units is about 1.263 billion, with a subscription multiple of 46.76. In terms of the final proportional placement results, the confirmation proportion of effective subscription applications from offline investors is about 2.60%, and the actual confirmation proportion of effective subscription applications from public investors is about 2.14%. The enthusiasm of investors continued to release after the listing of Huaxia Yuexiu Expressway REIT. This fund increased by more than 22% on the first day, approaching the 30% limit-up, and the one-day trading volume was as high as RMB 278 million, breaking the first day increase record of 14.72% of public-offering infrastructure REITs.
The active subscription of Huaxia Yuexiu Expressway REIT during both offline offering and public offering and its excellent performance on the first day of listing indicate the good reputation of Yuexiu Group in domestic and foreign capital markets, and fully reflects the investors' high recognition on the investment and financing management ability of Yuexiu Group and Yuexiu Transport as well as the investors’ unanimous recognition on the quality of underlying asset and the issuance arrangement of this fund.
The underlying asset has significant advantages and promising long-term development potential
The underlying infrastructure project corresponding to Huaxia Yuexiu Expressway REIT is Hubei Hanxiao Expressway, which is located in Wuhan City, Hubei Province. Hanxiao Expressway consists of the main line and the Northern Airport Connection. The charging mileage of the main line is 33.528km, and the total final investment is about RMB 1.055 billion. The charging mileage of the Northern Airport Connection is 4.968km, and the total final investment is about RMB 354 million. The charging period of both parts will expire on December 9, 2036.
In terms of geographical location, the Hanxiao Expressway has a very superior macro location. Wuhan is known as the 'No. 1 City in Central China', with its population size, total GDP and GDP per capita ranking the first among the provincial capitals in Central China. Located at the superior position as 'thoroughfare of nine provinces', Wuhan is positioned as a national central city and an international comprehensive transport hub. Adjacent to Wuhan Tianhe Airport, Hanxiao Expressway undertakes the function for providing the surrounding areas with rapid access to Tianhe Airport and for Airport Industrial Park with rapid access to the expressway network. In the area adjacent to Hanxiao Expressway and the airport, there are many logistics parks of leading enterprises such as GLP, Cainiao and YTO EXPRESS. These parks are highly mature and are still developing and expanding. In addition, in the area between Taoyuanji Interchange and Hengdian Interchange of Hanxiao Expressway, there are a large number of residential communities, shops and schools, with high degree of urbanization and strong flow of business and people.
Build a multi-level asset listing platform to promote the transformation and upgrading of business model
As a municipal state-owned enterprise supervised by Guangzhou State-owned Assets Supervision and Administration Commission, Yuexiu Group was established in Hong Kong in 1985. At present, it has four core businesses: finance, real estate, transport infrastructure and modern agriculture. In 2020, according to its statistical method, the total assets reached about RMB 730 billion, the operating income reached RMB 77.4 billion, the total profit reached RMB 19 billion, and the total annual profit and tax reached about RMB 30 billion. Since its establishment 36 years ago, Yuexiu Group has been fully relying on domestic and foreign capital markets, adhering to two drivers including industrial operation and capital operation, paying close attention to industrial operation, giving full play to the amplification effect of capital operation and realizing the leapfrog development. In the field of REITs, Yuexiu Group is the earliest practitioner in China, and went to Hong Kong to issue the real estate trust fund as early as 2005. Yuexiu Real Estate Investment Trust Fund ('Yuexiu REIT') (stock code: 00405. HK) is the first listed REIT in the world to invest in properties in mainland China. Since its listing 15 years ago, the asset scale has increased by 7.5 times. From the end of 2005 to the end of 2019, its closing price (split-adjusted) has increased by 307%, with a compound annual growth of 11%, bringing considerable returns to shareholders and winning a number of honors.
As one of the listed companies of Yuexiu Group, Yuexiu Transport was established in 1996, was listed on the Hong Kong Stock Exchange in 1997 (stock code: 01052. HK), and is the first domestic highway red chip listed in Hong Kong. Since its establishment 25 years ago, Yuexiu Transport has been highly focused on investment, M&A and operation management of toll roads and other transport infrastructure, and has been famous for its market-oriented, professional and refined business philosophy and stable business style. In terms of market-oriented M&A of toll roads, Yuexiu Transport has accumulated rich experience. It successfully acquired 9 expressway projects from 2008 to 2019. At present, there are 18 expressways, bridges and wharfs projects controlled, invested or managed by Yuexiu Transport, with a total mileage of about 958km, including 9 controlled projects, 7 participated projects and 2 managed projects, which are distributed in Guangdong Province and central provinces with high economic growth such as Hubei, Henan and Hunan.
By building a public-offering REITs platform, Yuexiu Transport is expected to open up the asset cycle of 'investment, financing, management and retirement' and realize the optimization and improvement of development mode, which is of great strategic significance for further expanding and strengthening its main business relating to transport infrastructure and realizing its medium-and long-term sustainable development. In addition, relying on the market-oriented system and mechanism as well as the professional talent team, Yuexiu Transport has adhered to the market-oriented M&A for many years, with sufficient asset reserves. In the future, it will continue to acquire high-quality assets, so as to provide the sufficient alternative targets for the raising of public REITs. It can be expected that, the public-offering REITs will become an asset listing platform carefully cultivated and continuously expanded by Yuexiu Transport. Drawing on the long-term interaction experience between Yuexiu REIT and Yuexiu Property, the benign interaction between Huaxia Yuexiu Expressway REIT and the sponsors will continue for a long time.
The implementation of this public-offering REIT project is also an important strategic measure for Yuexiu Group to rank itself among the Fortune Global 500 with high-quality growth in the “14th Five-Year Plan” period, which will further promote the listing of various assets, build a multi-level listing platform and develop a new capital operation mode for Yuexiu Group, so as to help Yuexiu Group support the high-quality development of the real economy in the Guangdong-Hong Kong-Macao Greater Bay Area.